Russian Oligarch

Russian oligarchs (Russian: олигархи, romanized: ''oligarkhi'') are business oligarchs of the former Soviet republics who rapidly accumulated wealth in the 1990s via the Russian privatisation that followed the dissolution of the Soviet Union. The failing Soviet state left the ownership of state assets contested, which allowed for informal deals with former USSR officials (mostly in Russia and Ukraine) as a means to acquire state property. Historian Edward L. Keenan has compared these oligarchs to the system of powerful boyars that emerged in late-medieval Muscovy.

The first modern Russian oligarchs emerged as business-sector entrepreneurs under Mikhail Gorbachev (General Secretary 1985–1991) during his period of market liberalization. The term " oligarch" derives from the Ancient Greek ''oligarkhia'' meaning "the rule of the few".

Since 2017, several Russian oligarchs and their companies have been hit by US sanctions under the table of Countering America's Adversaries Through Sanctions Act (CAATSA) for their support of "the Russian government's malign activity around the globe". In 2022, many Russian oligarchs were targeted and sanctioned by countries around the world as a rebuke of Russia's war against Ukraine.

Yeltsin era

During Mikhail Gorbachev's perestroika (-1991), many businessmen in Russia imported goods such as personal computers and jeans into the country and sold them for a hefty profit.

During the 1990s, once Boris Yeltsin became President of Russia in July 1991, the oligarchs emerged as well-connected entrepreneurs who started from nearly nothing and became rich through participation in the market via connections to the corrupt, but elected, government of Russia during the state's transition to a market-based economy. The so-called voucher privatization program of 1992–1994 enabled a handful of young men to become billionaires, specifically by arbitraging the vast difference between old domestic prices for Russian commodities (such as natural gas and oil) and the prices prevailing on the world market. Because they stashed billions of dollars in private Swiss bank accounts rather than investing in the Russian economy, they were dubbed " kleptocrats". These oligarchs became extremely unpopular with the Russian public, and are commonly thought of as the cause of much of the turmoil that plagued the Russian Federation following the collapse of the Soviet Union in 1991. ''The Guardian'' described the oligarchs as "about as popular with your average Russian as a man idly burning bundles of £50s outside an orphanage".

Emergence

Economists Sergei Guriev and Andrei Rachinsky contrast older oligarchs with nomenklatura ties and younger-generation entrepreneurs such as Kakha Bendukidze who built their wealth from scratch because Gorbachev's reforms affected a period "when co-existence of regulated and quasi-market prices created huge opportunities for arbitrage."

Although the majority of oligarchs were not formally connected with the Communist Party of the Soviet Union, there are allegations that they were promoted (at least initially) by the communist apparatchiks, with strong connections to Soviet power-structures and access to the funds of the Communist Party.
Mikhail Khodorkovsky started his business importing computers under auspices of the Komsomol-authorised Center for Scientific and Technical Creativity of the Youth in 1986, briefly serving as a deputy secretary of the Komsomol for a district in Moscow in 1987. His move into banking two years later was funded with support from Komsomol alumni working in Moscow city government. Later, he served in Russian government as an adviser to the prime minister and a deputy minister of fuel and power while still running his business.

Petr Aven worked alongside economist Yegor Gaidar in the (VNIISI), a Soviet Academy of Sciences think tank modelled after RAND. Gaidar later became the economics editor of the ''Kommunist'' journal, the official theoretical organ of the CC of the CPSU. He also held various positions up to the interim prime minister in the Russian government during 1991–1992.

A friend and a business partner of Boris Berezovsky, was a researcher at VNIISI as well. Berezovsky himself was Head of the Department of System Design at the another Academy of Sciences research centre, . His enterprise was established by the Institute as a joint venture.

Vladimir Vinogradov was the chief economist of Promstroibank, one of the six banks existing in the Soviet Union, previously serving as the secretary of Atommash plant Komsomol organisation.
Official Russian media usually depicted oligarchs as the enemies of "communist forces", which were portrayed as a stereotype that describes political power that wants to restore Soviet-style communism in Russia.

Post-Soviet business oligarchs include relatives or close associates of government officials, even government officials themselves, as well as criminal bosses often connected to the Russian government. Some members of these groups achieved vast wealth by acquiring state assets very cheaply (or for free) during the privatization process controlled by the Yeltsin government of 1991–1999. Specific accusations of corruption are often leveled at Anatoly Chubais and Yegor Gaidar, two of the "Young Reformers" chiefly responsible for Russian privatization in the early 1990s. According to David Satter, author of ''Darkness at Dawn'', "what drove the process was not the determination to create a system based on universal values but rather the will to introduce a system of private ownership, which, in the absence of law, opened the way for the criminal pursuit of money and power".

Involvement in politics

During Yeltsin's presidency (1991–1999) oligarchs became increasingly influential in Russian politics; they helped finance his re-election in 1996. Well-connected oligarchs like Abramovich, Khodorkovsky, Berezovsky and Potanin acquired key assets at a fraction of the value at the loans for shares scheme auctions conducted in the run-up to the election. Defenders of the out-of-favor oligarchs, often associated with Chubais's partythe Union of Right Forcesargue that the companies they acquired were not highly valued at the time because they still ran on Soviet principles, with non-existent stock control, huge payrolls, no financial reporting and scant regard for profit. They turned the businesses around and made them profitable for shareholders.

At the end of the century

The 1998 Russian financial crisis hit some of the oligarchs hard, however, and those whose holdings were still based mainly in banking lost much of their fortunes.

The most influential and well-known oligarchs from the Yeltsin era include:

* Boris Berezovsky
* Mikhail Fridman
* Vladimir Gusinsky
* Mikhail Khodorkovsky
* Vladimir Potanin
* Alexander Smolensky
* Pyotr Aven
* Vladimir Vinogradov
* Vitaly Malkin

They formed what became known as the (or "seven-banker outfit", ), a small group of businessmen with a great influence on Boris Yeltsin and his political environment. Together they controlled from 50% to 70% of all Russian finances between 1996 and 2000.

Fridman, Potanin, Aven and Malkin retained their wealth in the Putin era, which began in 1999. ''The Guardian'' reported in 2008 that oligarchs' from the era of former president Boris Yeltsin have been purged by the Kremlin".

Putin era

During Putin's first presidency term, a number of oligarchs came under fire for various illegal activities, particularly tax evasion in the businesses they acquired. However, it is widely speculated and believed that the charges were also politically motivated per these tycoons falling out of favor with the Kremlin. Vladimir Gusinsky of MediaMost and Boris Berezovsky both avoided legal proceedings by leaving Russia, and the most prominent, Mikhail Khodorkovsky of Yukos oil, was arrested in October 2003 and sentenced to 9 years. This was subsequently extended to 14 years, and after Putin pardoned him, he was released on 20 December 2013.

An economic study distinguished 21 oligarchic groups as of 2003. Between 2000 and 2004, Putin apparently engaged in a power struggle with some oligarchs, reaching a "grand bargain" with them. This bargain allowed the oligarchs to maintain their powers, in exchange for their explicit support of – and alignment with – Putin's government. However, other analysts argue that the oligarchic structure has remained intact under Putin, with Putin devoting much of his time to mediating power-disputes between rival oligarchs. Some had been imprisoned, such as Mikhael Mirilashvili.

Many more have become oligarchs during Putin's time in power, and often due to personal relations with Putin, such as the director of the institute where Putin obtained a degree in 1996, Vladimir Litvinenko, and Putin's childhood friend and judo-teacher Arkady Rotenberg. Daniel Treisman proposed using a term "silovarch" (silovik and oligarch) for new Russian oligarchs with backgrounds in Russian military and intelligence.

Prominent oligarchs of the Putin era include Roman Abramovich, Alexander Abramov, Oleg Deripaska, Mikhail Prokhorov, Alisher Usmanov, German Khan, Viktor Vekselberg, Leonid Mikhelson, Vagit Alekperov, Mikhail Fridman, Dmitry Rybolovlev, Vladimir Potanin, Pyotr Aven, and Vitaly Malkin.

In 2004, ''Forbes'' listed 36 billionaires of Russian citizenship, with a note: "this list includes businessmen of Russian citizenship who acquired the major share of their wealth privately, while not holding a governmental position". In 2005, the number of billionaires dropped to 30, mostly because of the Yukos case, with Khodorkovsky dropping from No. 1 (US$15.2 billion) to No. 21 (US$2.0 billion).

A 2013 report by Credit Suisse found that 35% of the wealth of Russia was owned by the wealthiest 110 individuals.

Billionaire, philanthropist, art patron and former KGB agent Alexander Lebedev has criticized the oligarchs, saying "I think material wealth for them is a highly emotional and spiritual thing. They spend a lot of money on their own personal consumption." Lebedev has also described them as "a bunch of uncultured ignoramuses", saying "They don't read books. They don't have time. They don't go to rtexhibitions. They think the only way to impress anyone is to buy a yacht." He also notes that the oligarchs have no interest in social injustice.

On 30 January 2018, the US Treasury published a "list of oligarchs" per Pub.L. 115–44.

Oligarchs in London

A significant number of Russian oligarchs have bought homes in upmarket sections of London in the United Kingdom, which has been dubbed "Moscow on Thames" or "Londongrad". Some, such as Eugene Shvidler, Alexander Knaster, Konstantin Kagalovsky, David Wilkowske and Abram Reznikov, are expatriates, having taken permanent residency in London. Most own homes in both countries as well as property and have acquired controlling interests in major European companies. They commute on a regular basis between London and Russia; in many cases their families reside in London, with their children attending school there. In 2007 Abram Reznikov bought one of Spain's mega recycling companies, Alamak Espana Trade SL, while Roman Abramovich bought the English football club Chelsea F.C. in 2003, spending record amounts on players' salaries.

The billionaire Moscow oligarch Mikhail Fridman, Russia's second richest man at a time, was restoring Athlone House in London as a primary residence in 2016, to be worth an estimated £130 million when restored.

2008 global recession and credit crisis

According to the financial news-agency Bloomberg L.P., Russia's wealthiest 25 individuals have collectively lost US$230 billion (£146 billion) since July 2008. The fall in the oligarchs' wealth relates closely to the meltdown in Russia's stock market, as by 2008 the RTS Index had lost 71% of its value due to the capital flight after the Russo-Georgian War of August 2008.

Billionaires in Russia and Ukraine have been particularly hard-hit by lenders seeking repayment on balloon loans to shore up their own balance sheets. Many oligarchs took out generous loans from Russian banks, bought shares, and then took out more loans from western banks against the value of these shares. One of the first to get hit by the global downturn was Oleg Deripaska, Russia's richest man at the time, who had a net worth of US$28 billion in March 2008. As Deripaska borrowed money from western banks using shares in his companies as collateral, the collapse in share price forced him to sell holdings to satisfy the margin calls.

2022 Invasion of Ukraine and sanctions

After the 2022 Russian invasion of Ukraine, Canada, US, and European leaders with the addition of Japan, took unprecedented steps to sanction Putin and the oligarchs directly. In response to the sanctions, the targeted oligarchs started to hide wealth in an attempt to prevent the Western nations from freezing their assets. These sanctions intend to directly impact the Russian ruling class as a response for their perceived contribution and acquiescence to the war with Ukraine. Although the sanctions tend to miss the richest oligarchs, the impact on the war is unknown due to Putin's power over those that were sanctioned. Since the invasion began, nine of the Russian oligarchs' yachts have turned their navigation transponders off as they sail to ports where they are less likely to be searched and seized.

In addition to freezing foreign holdings, restricting travel, and severing business ties, the sanctions aim to impact the personal lives of a number of oligarchs including;

* Vladimir Putin (President of Russia)
* Alexander Aleksandrovich Vedyakhin (Sberbank banking executive)
* Andrey Sergeyevich Puchkov (VTB Bank banking and football chairman)
* Yuriy Alekseyevich Soloviev (FC Dynamo Moscow club chairman and a VTB Bank executive)
* Igor Sechin (Rosneft oil executive and former Deputy Prime Minister of Russia)
* Andrey Patrushev (son of the Secretary of the Security Council of Russia Nikolai Patrushev)
* Sergei Sergeevich Ivanov (Board member of Gazprombank and president of Alrosa diamond mining)
* Kirill Shamalov (Gazprom Executive and former son-in-law of Putin)
* Yury Slyusar (director of United Aircraft Corporation and board member of Aeroflot, Russian Airlines Pjsc and United Aircraft)
* Petr Fradkov (Promsvyazbank executive, son of Mikhail Fradkov)
* Gennady Timchenko (president of Volga Group private equity)

On March 2, 2022, the United States announced a special task force dubbed " Task Force KleptoCapture". This team was put together to specifically target oligarchs. It is made up of officials from the FBI, Marshals Service, IRS, Postal Inspection Service, Homeland Security Investigations and Secret Service. The main goal of the task force is to impose the sanctions set against these individuals to freeze and seize the assets that the US government claimed were proceeds of their illegal involvement with the Russian government and the invasion of Ukraine.

On March 21, 2022, the Organized Crime and Corruption Reporting Project launched Russian Asset Tracker to showcase the profiles and assets of several Russian oligarchs.

In popular culture

* Peter Morgan's play '' Patriots'' depicts the rise and fall of oligarchs by focusing on the story of Boris Berezovsky bringing Vladimir Putin to power and later falling out with him. The play was staged in Almeida Theatre, London in 2022.
*The 2002 Russian movie ''Tycoon'' tells the story of emergence of oligarchs during the early years of Russian capitalism. The film is based on , a book about Boris Berezovsky written by .
* The main antagonist of the fourth episode of the first season (1x04) of '' Fast & Furious: Spy Racers'' (''"The Owl Job"'') is a Russian oligarch named Sudarikov (voiced by Fred Tatasciore), who is known to be a notorious high-end arms dealer.
* One of the most recurring characters during the third and fourth seasons of '' Billions'' is the ruthless European billionaire oil tycoon Grigor Andolov (played by John Malkovich), a powerful Russian oligarch, owner of a billionaire oil empire and a dangerous criminal from Eastern Europe with ties to with the European criminal underworld and protected by various authoritarian governments.

See also

* 2022 Russian businessmen mystery deaths
* Banking in Switzerland
* Corruption in Russia
* List of Russian billionaires
* Media mogul
* Oligarchy
* Political groups under Vladimir Putin's presidency
* Privatization in Russia
* Reputation laundering
* Robber baron (industrialist)
* Russian asset tracker
* Russian mafia
* Tycoon
* Ukrainian oligarchs

References

Further reading

*
*
* Bowen, Andrew
"Why London Is So Crucial to Putin's Russia"
''The Interpreter'', 20 March 2014.
* Hoffman, David E. ''The Oligarchs: Wealth and Power in the New Russia'', New York, Perseus Book Group, 2002.
* Hollingsworth, Mark, and Stewart Lansley, ''Londongrad: From London with Cash: The Inside Story of the Oligarchs'', London, Fourth Estate, 2009.
*
* Watkins, Thayer
"The Russian Oligarchs of the 1990s"
applet-magic.com.
* Yablon, Alex (31 March 2013)
"Oligarchology"
''New York''.

External links

Russian Asset Tracker

{{DEFAULTSORT:Russian Business Oligarch
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1990s establishments in Russia
Politics of Russia
Social groups of Russia
Wealth in Russia